La Bugal- B’Laan Tribal Association. Inv V.

Ramos

Review Questions:

1. What was the main relief which the Petitioners want from the Court?

Petitioners pray for the cancellation of the FTAA as unconstitutional, illegal null and void and the
declaration of unconstitutionality of RA 7942

They pray that the Court issue an order:

(a) Permanently enjoining respondents from acting on any application for Financial or Technical

Assistance Agreements;

(b) Declaring the Philippine Mining Act of 1995 or Republic Act No. 7942 as unconstitutional and null

and void;

(c) Declaring the Implementing Rules and Regulations of the Philippine Mining Act contained in

DENR Administrative Order No. 96-40 and all other similar administrative issuances as

unconstitutional and null and void; and

(d) Cancelling the Financial and Technical Assistance Agreement issued to Western Mining

Philippines, Inc. as unconstitutional, illegal and null and void.

2. What were the primary objections which they raised before the Court?

Petitioners states that the FTAA had been executed in violation of Section 2 of Article XII of the 1987
Constitution. According to petitioners, the FTAAs entered into by the government with foreign-owned
corporations are limited by the fourth paragraph of the said provision to agreements involving only
technical or financial assistance for large-scale exploration, development and utilization of minerals,
petroleum and other mineral oils. Furthermore, the foreign contractor is allegedly permitted by the
FTAA in question to fully manage and control the mining operations and, therefore, to acquire
"beneficial ownership" of our mineral resources.

3. What is the Philippine Mining Law

This Act shall govern the exploration, development, utilization and processing of all mineral
resources.

RA 7942 or also known as the Philippine Mining Act of 1995 is the main policy/legislation which
governs all mining operations in the country and includes various measures to protect the
environment and define areas in which mining can be allowed. The legislation provides two
approaches in forming and finalizing mining contracts namely: the Mineral Production Sharing
Agreement (MPSA) and the Foreign Technical Assistance Agreement (FTAA) which permits 100
percent foreign ownership of mining operations.

4. Distinguish the Philippine Mining Act from the Small Scale Mining Law

Philippine Mining Act or RA 7942 is the main policy governing all types of mining activities in the
country. It includes measures and implementing rules with regards to all kinds of mining activities,
including large-scale mining. It allows foreigners to invest on mining activities in our country given that
the Philippines has still the overall control of such activity. While RA 7076 or also known as the People’s
Small-scale Mining Act of 1991, is also included in Sec VII of RA 7942. It focuses more in the promotion,
development, protection and rationalization of viable small-scale mining activities which is applicable
to gold, silver and chromite only. Such activities are governed by this law in order to generate
more employment opportunities and provide an equitable sharing of the nation’s wealth and natural
resources, giving due regard to existing rights. These mining activities are all covered under the
Minahang Bayan of the government.

5. Is the Philippine Mining Law Constitutional?

Yes. The Supreme Court held that the primacy of the principle of the State's sovereign ownership of all mineral
resources, and its full control and supervision over all aspects of exploration, development and utilization of natural
resources must be upheld. But "full control and supervision" cannot be taken literally to mean that the State
controls and supervises everything down to the minutest details and makes all required actions, as this would
render impossible the legitimate exercise by the contractor of a reasonable degree of management prerogative and
authority, indispensable to the proper functioning of the mining enterprise. Also, government need not micro-
manage mining operations and day-to-day affairs of the enterprise in order to be considered as exercising full
control and supervision.

Control, as utilized in Section 2 of Article XII, must be taken to mean a degree of control sufficient to enable the
State to direct, restrain, regulate and govern the affairs of the extractive enterprises. Control by the State may be
on a macro level, through the establishment of policies, guidelines, regulations, industry standards and similar
measures that would enable government to regulate the conduct of affairs in various enterprises, and restrain
activities deemed not desirable or beneficial, with the end in view of ensuring that these enterprises contribute to
the economic development and general welfare of the country, conserve the environment, and uplift the well-being
of the local affected communities. Such a degree of control would be compatible with permitting the foreign
contractor sufficient and reasonable management authority over the enterprise it has invested in, to ensure
efficient and profitable operation.

Furthermore, saseless are petitioners' sweeping claims that RA 7942 and its Implementing Rules and Regulations
make it possible for FTAA contracts to cede full control and management of mining enterprises over to fully foreign
owned corporations. Equally wobbly is the assertion that the State is reduced to a passive regulator dependent on
submitted plans and reports, with weak review and audit powers and little say in the decision-making of the
enterprise, for which reasons "beneficial ownership" of the mineral resources is allegedly ceded to the foreign
contractor.

As discussed hereinabove, the State's full control and supervision over mining operations are ensured through the
following provisions in RA 7942: Sections 8, 9, 16, 19, 24, 35[(b), (e), (f), (g), (h), (k), (l), (m) and (o)], 40, 57, 66, 69,
70, and Chapters XI and XVII; as well as the following provisions of DAO 96-40: Sections7[(d) and (f)], 35(a-2),
53[(a-4) and (d)], 54, 56[(g), (h), (l), (m) and (n)], 56(2), 60, 66, 144, 168, 171 and 270, and also Chapters XV, XVI
and XXIV.

Through the foregoing provisions, the government agencies concerned are empowered to approve or disapprove --
hence, in a position to influence, direct, and change -- the various work programs and the corresponding minimum
expenditure commitments for each of the exploration, development and utilization phases of the enterprise. Once
they have been approved, the contractor's compliance with its commitments therein will be monitored. Figures for
mineral production and sales are regularly monitored and subjected to government review, to ensure that the
products and by-products are disposed of at the best prices; copies of sales agreements have to be submitted to
and registered with MGB.

The contractor is mandated to open its books of accounts and records for scrutiny, to enable the State to determine
that the government share has been fully paid. The State may likewise compel compliance by the contractor with
mandatory requirements on mine safety, health and environmental protection, and the use of anti-pollution
technology and facilities. The contractor is also obligated to assist the development of the mining community, and
pay royalties to the indigenous peoples concerned. And violation of any of the FTAA's terms and conditions, and/or
non-compliance with statutes or regulations, may be penalized by cancellation of the FTAA. Such sanction is
significant to a contractor who may have yet to recover the tens or hundreds of millions of dollars sunk into a
mining project.

Overall, the State definitely has a pivotal say in the operation of the individual enterprises, and can
set directions and objectives, detect deviations and non-compliances by the contractor, and enforce
compliance and impose sanctions should the occasion arise. Hence, RA 7942 and DAO 96-40 vest in
government more than a sufficient degree of control and supervision over the conduct of mining
operations.

Section 3(aq) of RA 7942 was objected to as being unconstitutional for allowing a foreign contractor to apply for and
hold an exploration permit. During the exploration phase, the permit grantee (and prospective contractor) is
spending and investing heavily in exploration activities without yet being able to extract minerals and generate
revenues. The exploration permit issued under Sections 3(aq), 20 and 23 of RA 7942, which allows exploration but
not extraction, serves to protect the interests and rights of the exploration permit grantee (and would-be
contractor), foreign or local. Otherwise, the exploration works already conducted, and expenditures already made,
may end up only benefiting claim-jumpers. Thus, Section 3(aq) of RA 7942 is not unconstitutional.